Each year, typically at the end of October, US equity mutual funds assign the year-to-date taxable gains or losses to their current investors. If you were to make an investment shortly before this in a year when the fund had a lot of gain, you could experience the inequity of paying taxes on an amount far larger than your real economic gain. On the other hand, in a year when the fund allocated large losses, a purchase shortly before the time to receive the losses could let investors reduce their tax bill without having had a corresponding economic loss.
